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could something approaching this scenario happen with two companies that each own 100% of each other? It’s clearly possibly for one corporation to own 100% of the shares of another (I believe that is known as a “wholly-owned subsidiary”). What would happen if each company owned 100% of each other?
E.g. IBM is in the middle of negotiations to acquire 100% of Ford, either on the open market or by a forced buyout. In the meantime, Ford is also scrambling to acquire IBM shares. At some time=T, they reach equilibrium about the same time and executives stare back in horror at the stock readouts which indicate that Ford is 100% owned by IBM, and that IBM is 100% owned by Ford.
In theory and with no regulations, the answer is yes. To see this simply imagine you start up two corporations and issue one share to each. Let them earn some money. Then use the money in corp A to buy the one share of corp B. You own the share so you can agree to any price. There is still money in the B corp so now buy the A share.
In an efficient market the value of the A share should be above the value of all the assets of the B share since it owns it, so B could never have enough to do this, but no one said the market had to be efficient.
Whether or not there are any prohibitions about this – or what the legal ramifications of the two orphaned companies are, I have no idea.
There is always an “officer of record” who is legally accountable for the actions of the company. The company cannot effectively take any action without the assistance of a human.
If A buys B, B is controlled by A, The board of directors of B has no voting power to execute a purchase of A. A would be effectively trying to buy itself.
Nothing. Corporations can’t exist without government bodies to issue charters or to incorporate them. Who would buy a share of stock if stocks didn’t come with legal provisions as to ownership, control, or voting? Corporations are creatures of the laws of the land. You can’t take them outside and assume they would continue to live. You can’t even compare them to earlier businesses where people could own shares of a company. Corporations aren’t people in that sense.
Yes, we have a house corporation, not an outside corporation. Although it always tries to sneak out the door if we’re not paying attention, the little scamp.
And yet I’m told declawing is not recommend by corporate experts. That makes them dangerous in unexpected ways. Probably the reason why minors are not allowed to have them.
This came close to happening in 1982 when Bendix (under Bill Agee) made a hostile take-over attempt on Martin-Marietta, and Martin-Marietta countered with a hostile offer to acquire Bendix. The details came down to the separate timing of ownership and control. Here is a short blurb from Wikipedia:
“In 1982 Bendix launched a hostile takeover bid of Martin Marietta. Bendix bought the majority of Martin Marietta shares and in effect owned the company. However, Martin Marietta’s management used the short time between ownership and control to sell non-core businesses and launch its own hostile takeover of Bendix – the Pac-Man Defense. Industrial conglomerate United Technologies joined the fray, supporting Martin Marietta in their counter-takeover bid. In the end, Bendix was rescued by the Allied Corporation, acting as a white knight. Bendix was acquired by Allied in 1983 for US$85 per share.”
Okay, fine. Assume the laws of the land do not include those restrictions you mentioned–that the government has allowed the corporations to exist, but does not requirement of announcements. Or some loophole is found ala JWT Kottekoe’s post.
Or, in other words, do you have an answer to the second question, rather than the first? Because I find that the more interesting question.